NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Growth and Convergence across The United States

Robert J. Barro, Xavier Sala-i-Martin

NBER Working Paper No. 3419
Issued in August 1990
NBER Program(s):   EFG

A key economic issue is whether poor countries or regions tend to grow faster than rich ones: are there automatic forces that lead to convergence over time in levels of per capita income and product? After considering predictions of closed- and open-economy neoclassical growth theories, we examine data since 1840 from the U.S. states. We find clear evidence of convergence, but the findings can be reconciled quantitatively with neoclassical models only if diminishing returns to capital set in very slowly. The results from a broad sample of countries are similar if we hold constant a set of variables that proxy for differences in steady-state characteristics. Two types of existing theories seem to fit the facts: the neoclassical growth model with broadly-defined capital and a limited role for diminishing returns, and endogenous growth models with constant returns and gradual diffusion of technology across economies.

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Document Object Identifier (DOI): 10.3386/w3419

Published: Published as "Unanticipated Money, Output, and the Price Level in the United States", Journal of Political Economy, Vol. 86, no. 4 (1978): 549- 580.

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